March 28 (Bloomberg) -- Akao Aluminum Co., Japan’s only
supplier of one-yen coins, produced its first batch in four
years to meet an expected surge in demand for small change when
the country’s sales tax increases to 8 percent on April 1.

Akao this month finished about 26 million faceless one-gram
aluminum coins that it sent to the Japan Mint’s Hiroshima
branch, where the figure “1” and the year is being stamped on
one side, and a symbol of a tree on the other, said Yoshinori
Nakao, the production manager of the Tokyo-based company.

Minting more coins may save retailers from shortages that
accompanied the introduction of the sales tax at 3 percent in
1989, according to Masao Nakata, an economics professor at Seijo
University in Tokyo. The consumption tax was last raised, to 5
percent, in 1997. Japanese coins come in denominations of one,
five, 10, 50, 100 and 500 yen.

“We still have orders to make another 30 million coins,”
Nakao, 57, said by phone from a factory in Tokyo yesterday. The
company won’t make a profit from the original order because it
had to rehire four employees out of retirement to refurbish the
idled machinery needed, he said.

The company, founded in 1960, makes flat-rolled and shaped
aluminum and alloy products.

Raising the sales tax is part of Prime Minister Shinzo
Abe’s plan to reduce the world’s biggest debt burden and to
stoke inflation in an economy plagued by decades of falling
prices. Japan’s debt will equal 242 percent of the economy by
the end of 2014, according to International Monetary Fund.

Cheaper Aluminum

The aluminum in the 26 million new coins is worth about
$45,247, based on the price of $1,740.25 a metric ton on the
London Metal Exchange at 10:30 a.m. in Tokyo. That compares with
their currency value of about $255,000.

Benchmark three-month aluminum futures in London have sunk
8.6 percent in the past year due to overcapacity in the market,
making it cheaper to produce the new coins. The metal is 49
percent below its all-time high of $3,380.15 a ton set in 2008.

Coin usage in Japan remains popular, even as digital
payments become more common. The total value of all coins in
circulation hit a record in December 2013 at 4.6 trillion yen,
according to Bank of Japan data.

The government plans to raise core consumer prices by 2
percent in two years from last April, which a Ministry of
Finance study showed would increase coin use. There are
currently 38.8 billion one-yen coins in circulation.

Outlets such as 100-yen stores found across the country
expect to need more one yen coins, as the price of most of their
products will rise to 108 yen from 105 yen.

“We’ve tried to calculate extra coin demand using several
scenarios,” Yoko Matsuda, a spokeswoman for Seria Co., a 100
yen store chain, said on March 25. “We do expect an increase in
demand.”